Christine Tacon, new groceries code adjudicator, will oversee a code of practice governing relations between supermarkets and suppliers. Photograph: David Levene

The UK's new supermarket watchdog wants to fine retailers a percentage of their turnover if they mistreat suppliers.

Christine Tacon, the groceries code adjudicator who started work on Tuesday, is able to impose fines and force supermarkets to apologise publicly with ads in national newspapers if they do not treat suppliers fairly. She is in charge of overseeing a legally binding code of practice, put in place more than three years ago, for supermarkets with a turnover of more than £1bn, such as Tesco, Sainsbury's and Asda.

The code does not govern the prices retailers agree with their suppliers, but aims to prevent changes part-way through the contracts. It covers groceries including food, drink and toiletries, but does not include clothing or tobacco.

Speaking on her first day in office, Tacon said her first job is to recommend the rules under which investigations would occur and the maximum fines that could be imposed.

Those recommendations are expected to be published in the next few weeks and will then undergo a 12-week consultation. The new system must be in place before Christmas Day, before which MPs will have to approve the maximum fine.

Tacon said she was inclined to base fines on supermarkets' turnover as this was a straightforward approach similar to that used by the Office of Fair Trading. She said: "Fines are there as the ultimate deterrent. I am prepared to use my powers but I hope we don't have to get to that stage."

She has spent several months talking to suppliers ahead of her official appointment this week but will only be able to look into complaints about breaches of the code that occur from her first day in office. She will be able to arbitrate on disputes and investigate complaints made anonymously or by third parties such as the National Farmers' Union.

She will be looking at issues such as supermarkets charging up to £1m to display suppliers' products, or the imposition of fines for customer complaints that have nothing to do with quality of the goods supplied. Tacon argues that such ruses add extra costs to the industry, forcing up prices for shoppers.